Apollo Global comes with upsized inaugural preferred deal; HCI to redeem 8% $25-par notes

By Stephanie N. Rotondo

Seattle, Feb. 28 – A new preferred stock deal came to market in the last trading session of February, a $250 million offering of 6.375% series A preferreds from Apollo Global Management LLC.

Price talk was initially around 6.5% but was later revised to 6.375%. The deal was upsized from $150 million.

After pricing was revised, the preferreds were quoted at $24.82 bid, $24.88 offered in the gray market.

Prior to the revision, the preferreds were pegged at $24.85 bid in the early gray market, but no offers.

“I heard it is mostly going to be put away to institutional [investors],” a trader said.

BofA Merrill Lynch, Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities LLC ran the books.

Proceeds will be contributed to Apollo’s indirect subsidiaries for general corporate purposes.

Meanwhile, HCI Group Inc. priced a $125 million sale of 4.25% convertible senior notes due 2037 on Tuesday, the proceeds of which will go, in part, to redeem the company’s outstanding 8% $25-par senior notes due 2020 (NYSE: HCJ).

“This is the first time I’ve seen in awhile where someone issues a convert to take out a preferred,” one sellside source noted. “This could be a new trend.”

On the news, the 8% notes were down 73 cents, or 2.81%, at $25.27.

The new issue market could pick up, a trader speculated, given that there has been a fair amount of shelf registrations filed.

“Everyone is waiting for this tax plan to come out,” the trader said, referring to president Donald Trump’s comments that such a plan was on the horizon. However, in order for the plan to work, the Republicans’ planned repeal of Obamacare must first be dealt with, as the funds the GOP expects to save from that will be used to pay for the expected tax cuts.

As for other recent deals, Chimera Investment Corp.’s $300 million of 8% series B fixed-to-floating rate cumulative redeemable preferred stock are slated to list on the New York Stock Exchange on Wednesday.

The ticker symbol will be “CIMPrB.”

The deal came Feb. 22.

Ahead of the listing, the preferreds were trading actively – under the temporary ticker “CIMEP” – and better, closing a penny higher at $24.93.

Overall, the preferred stock space finished the day mixed, as the Wells Fargo Hybrid and Preferred Securities index was up 9 basis points at mid-morning, but the U.S. iShares Preferred Stock index was down 22 bps.

GSEs, Torchmark busy

In secondary trading, Fannie Mae and Freddie Mac continued to be in focus.

However, the preferreds managed to end the day better, unlike in the past few sessions where they traded mixed to lower.

Fannie’s 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) improved 59 cents, or 7.7%, to $8.25. Freddie’s 8.375% fixed-to-floating rate noncumulative preferreds (OTCBB: FMCKJ) rose 55 cents, or 7.59%, to $7.80.

Meanwhile, Torchmark Corp.’s 6.125% $25-par junior subordinated debentures due 2056 (NYSE: TMKPrC) were quite active for the name, trading over 731,000 times.

But there was no fresh news to act as a catalyst for the surge in volume, nor the downward tilt.

The debentures closed off 16 cents at $25.65.

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